If you own a leasehold property, or if you are considering to buy one and you want to know if it’s hard to sell a leasehold property, there are a number of things to consider, as leasehold properties are different to freehold properties.
It is a little harder to sell leasehold property vs freehold property as leasehold properties have annual service charges and ground rents to pay, making them less attractive. Also, the remaining lease term affects its saleability, and if this is under 80 years it will be harder to sell.
Please also read this article to discover how you could save £71,475 on your next mortgage if you sell your house and rent before buying again. Even I was amazed when I did the calculations! The strategies you learn in this article will not only save you money, but it will also reduce the stress of buying your next house.
What is a leasehold property?
A leasehold property is a property that is owned for a fixed period of time. When you buy a leasehold property your ownership includes a legal agreement with the landlord or freeholder, which contains the conditions of the lease and the lease term. Most flats and apartments are leasehold properties.
Can you get a mortgage on a leasehold property?
You can get a mortgage on a leasehold property provided the lease has at least 70 years left to run, but the shorter the lease, the more difficult it is to get a mortgage. Mortgage lenders don’t only take account of the remaining lease term, but also consider the other terms contained in the lease.
Selling a leasehold property timescale
The timescale for selling leasehold property is around 6-8 weeks once an offer is accepted, but this timescale increases if it’s not a chain-free sale or if there are complications during the conveyancing process. The strength of the property market will affect how long it takes to receive an offer.
What can make it harder to sell a leasehold property?
There are a number of factors that can make it harder to sell a leasehold property, which include:
- Remaining term on the lease: Leasehold property becomes much harder to sell once the remaining term on the lease falls below 80 years. The lease term can be extended by serving a Section 42 Notice on the freeholder, but the shorter the lease, the more expensive this becomes.
- Service charges: The level of service charge can put potential buyers off from buying a leasehold property. The service charge is to cover for repairs, maintenance, utilities and other costs for the common parts of the apartment building.
- Ground rents: Ground rents can put some buyers off from buying a leasehold property, but often times with more modern flats and apartments the ground rent is usually less and £200 per year. But on the other hand some lease agreements ground rents double every few years, which can make a leasehold property impossible to sell.
- Restrictive covenants: Most leases include restrictive covenants, which can put some buyers off from buying a leasehold property. Lenders are also interested in the restrictive covenants too, as they need to know the property is good security for the mortgage, and some covenant restrictions can be damaging to a property’s value.
- Type of property: Most leasehold properties are apartments and flats which attract a certain type of buyer. Buyers of leasehold properties tend to be first time buyers and property investors, which can limit the market and make it harder to sell.
- Subletting clause: Most leases have a sub-letting clause, which governs if you can sub-let the property, and if you are able to sub-let whether you have to pay a sub-letting fee to the freeholder.
- Service accommodation restrictions: Many leasehold flats and apartments have leases that prevent them from being used for serviced accommodation or let out using Airbnb.
- Slow acting freeholder: During the conveyancing of a freehold property your conveyancing solicitor will need to liaise with the freeholder or the freeholder’s solicitor. If the freeholder is slow at responding to your solicitor, this will slow down the sales process.
- Condition of the building: As a leaseholder you are not responsible for the outside of the building, nor for the entrance to the building and the corridors to the individual flats. This is the responsibility of the freeholder, and this is paid for out of the service charges. If the freeholder is bad at keeping the building in good condition, this will make it harder to sell the property and it will also affect its market value.
- Pets are often not allowed: Many leasehold properties, and especially leasehold flats and apartments don’t allow owners to have pets like cats and dogs. So this cuts down the size of the market by those who have pets.
How long are leases on leasehold properties?
The majority of leases begin with a 99 year lease term, but in recent years lease terms are starting with 125 years or even for 999 years. These longer 999 year leases are almost freehold in nature, as the term will outlast most owners.
How you sell a leasehold property
Selling a leasehold property is no different to selling freehold property, as you first appoint an estate agent to sell the property, and once an offer has been accepted, you engage a conveyancing solicitor to affect the sale.
A great article to read alongside this article is this one “Offer On House Accepted Now What: 4 Main Steps To Follow“. This article includes the four main steps to follow once an offer has been accepted.
Please don’t forget to read this before you leave…
Please don’t forget to also read this article to discover how you could save £71,475 on your next mortgage if you sell your house and rent before buying again. As I said earlier, even I was amazed when I did the calculations! Learn about how you will reduce the stress of moving house, whilst at the same time potentially save thousands in the process!
You may also want to read about the difference between maisonettes vs houses vs flats, where most maisonettes like flats and apartments are also leasehold.
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